Does My Business Need A Key Person Life Insurance Plan?
Key person life insurance is a type of insurance that protects a business in the event of the unexpected passing of an irreplaceable and critical member of that business. The policy is for the key employees; however, the business is the beneficiary and pays the premiums. If you run a small business that has a handful of irreplaceable members, you may want to consider purchasing a key person insurance plan to protect your company and prepare for the unexpected.
How does key person life insurance work?
If you’re considering key person life insurance, the first step would be to determine what the monetary value of the key individuals in your business is. Once you map out the financial effects of losing that person, whether it’s through lost sales, the cost to find that person’s replacement, or costs to close the business and pay off its debts – you can make a decision. The insurance provider would look at your company’s legal structure and determine how it would work for your unique business. It’s important that the key employees in question provide explicit and written consent to the company to own such a policy.
Do I need key person life insurance?
As every business and their respective employees are unique, there’s no one size fits all situation. That being said, there are some traits and circumstances to look out for.
- If the reputability and ability to draw new business opportunities are explicitly tied to a single individual, then they could be critical to insure.
- Some employees, particularly in sales, can be a huge asset in bringing in new business and maintaining pre-existing relationships.
- When a couple of partners jointly own the business, and each partner would want the opportunity to buy out the others’ shares in the case of death, a key person insurance policy would aid in the financial viability of this scenario.
Key person life insurance can help protect your small business from collapsing under the weight of unexpected circumstances. If you think any individuals are essential to your business, you should definitely consider a key person life insurance policy.
Want to find out more?
Schechner Lifson Corporation is an independent insurance agency that can offer you help in key person life insurance for your small business. With experienced and caring agents, Schechner Lifson Corporation can make sure you get the right coverage at a price that may just be more affordable than you think. Contact us today!